1: When you use "explicit alpha" you should use DXT3, otherwise you'll get an increased file size with no need for it.
2: The native banners textures don't even use the alpha channel, although I believe this mod uses it.
3: When you use the alpha channel for transparency and you don't need greyscale tones transparency (read half-transparency), you should use DTX3 format, because you get savings regarding file size.
4: I haven't tried this tool yet (although I probably will) and regardless of how I appreciate the effort, any strange artifacts you may get in game will be due to the texture mapping, assuming you're doing everything else right.
Hope this helps